Mad Money 08/18/26 | Audio Only

My mission is simple. To make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere and I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. Other people, my friends, I'm just trying to save a little money here. My job is not just to entertain, but to educate, to teach. So call me at 1800 743 CBC. Tweet me at Jim Kramer. Nothing's easier than being negative right now. We practically revel in it, don't we? There's so much to dislike about the economy, about the frantic nature of tech, about oil, about the president's handling of the war, about inflation, about housing affordability, and about the bond market, whether it be the 2-year, the 10ear, or the dreaded 30-year varietal. So it's easy to see why the market sells off on the daily today with the Dow slipping 116 points, S&P declining 69%, NASDAQ tumbling 1.33%. A true annihilation for all the great data center and hardware stocks that have been so hot. But for a moment, let me give you an al alternate reality. No, I'm not going to say that while we have too much debt, so much we have to now a trillion dollar bill just on the interest of the deficit that it's something we can handle. That would put me right up here on the top of the stupidity chart. I don't know how it gets resolved here or in the other countries with rates are too high. But let's accept for the moment that the bank won't be broken anytime soon and move on. No excuses for the president either. With the way this war is going, it's becoming a rare issue that now unites the left and the right with disgust. It's not even controversial, right? Almost no one likes it. Not just because it raises the price of all fuels, especially diesel. We all have our true norths. I like the late General George Marshall, the highest ranking officer in the army during World War II. He would not tolerate losing. Neither would Harry Truman. President Trump often talks about loser this and loser that and how presidents have lost war after war. If he wants to see how who didn't lose a war, maybe should check those two out. Hey, or how about getting right with Lincoln. Wars can be won even by someone who says he's not willing to lose. But I want to make a contrary argument that's bigger than that for a moment. We all know that as long as the president and the Iranians can't agree to anything and theou has expired, we can't expect anything good to come of it. That said, we also know that these oil rallies can get overdone. We know that the strait is one way of getting oil through this. The hoodies and Yemen are trying to top the Red Sea, too. We know the Iranians are receiving all sorts of weapons from Russia. Can't believe the Russians have anything to spare, but apparently they do. But the Hoodies might just be on borrowed time given that they're surrounded by enemies. So, I'm going to count the Red Sea as a stopping point. At the same time, we'll soon be pumping much more oil here in America because there are a host of pipelines that will now take natural gas that flares when the oil companies drill. You're not allowed to flare in this country. There'll be a huge amount of drilling coming out that you're not even hearing about in New Mexico. It isn't even being considered. It should be. I bet that becomes our biggest growth area within the next 5 years. The buck is growing again. Venezuela is pumping even more as it's refining capacity shot. The Chinese seem to have a limitless strategic petroleum reserve, too. I just don't see oil skyrocketing much past $100 in Brent. It's now at $91. Not positive, but it's not the end of the world. Even as it's jacking diesel up well over $5 a gallon, I'm simply saying that oil will get to a price that doesn't push bonds down every single day. And then that will get oil out of the way, which is a huge positive. And how about those pesky bonds? All we ever hear about is the worldwide bond crisis. It's not good news. But again, can we please remember the pigs? That's when uh Portugal, Ireland, Italy, Greece, and Spain nearly collapsed about 15 years ago. I mean, holy cow. >> That was supposed to spark another global financial crisis. That's much worse than this. It didn't. These countries literally couldn't pay their bills. We're nowhere close to that. More important, while rates go up both of because of oil and because of Treasury issuance, we often forget that there are plenty of people who've actually been eagerly waiting for higher yields before they put their money to work in bonds. They can go buy some 30-year paper right now at 5.28, then they can buy some more 5.5%. Consider it like a stock. All right, they're averaging down. They're getting a decent return. Stay focused. I don't love it when bond yields are on the rise. It often signals the Fed is going to tighten, right? Very bad for stocks. That doesn't mean bonds are in crisis. Once again, something not great, but not enough to bring us down. Just put what you hear away from me. How about the NASDAQ? It may be inflated because of the data center build out, but don't tell that to shareholders, Meta or Google or Apple or Tesla or Microsoft. There's no joy in that, mud, Bill. These stocks have done next to nothing. The semis have soared. They came back down to earth today in a real crash. >> Everyone fears them after this kind of sell off. No one wants to touch them now, right? Oh, they're no good. And thanks to Ryan Dietrich, someone I follow on X, I was amazed to see that we have the most shorts ever in the NASDAQ. That many people really be right. When a trade gets that crowded, is it usually isn't usually wrong? For the investing club, we are actually looking to buy some beat up data center sucks. We bought a wei one today. You can buy them pyramid style on the way down. Pay special attention to Micron Moo, which we bought recently for the chapel trust. Why? Okay. On Thursday, we're going out to see Sandre Morosa, the CEO of Micron, and his home turf in Boise, Idaho. Talk about a special trip right into the heart of the most important piece of hardware in the data center because there is a tremendous scarcity of these kinds of memory chips and this man is trying to solve that. We have to learn what's going on. The media is not telling you enough. That changes this week. Finally, in my litany of things that just aren't that horrible, front and center is the consumer. Last time I talked about how well Airbnb is doing. It's on fire. People traveling their darn full heads off. They're using AI to write programs and answer calls and it's saving them for today. of the fireworks came from Home Depot, which had its best quarter in five years, strengthened 13 to 16 merchandise units. Truly good numbers for the pro business, which is terrific because pro is sticky and the despot spent a fortune buying companies like SRS distribution that cater to the pros in roofing pools and GMS, the old gypsum, which uh that helps contractors with walls and ceilings. The cadence, how each month did in sequence, showed an excellent pattern. They they hailed they had just great sales from those who use their natural language sites to explore and find products. And all this happened at a time when housing barely has a pulse. Yeah, nobody cared much higher. The stock actually fell 90 39 cents. That's stupid. But what if Target's good tomorrow, right? I mean, the airport. What if they raise numbers? What if the growth justifies the run has? Well, I don't think you're going to keep Home Depot down or Target for that matter. What if Walmart's good later in the week? I see the chaos in the data center today. It could be a tad deserving. Anthropic put out a set of numbers that should be considered a slowdown from a previous high growth pace. Higher rates could make the tech titans a little bit more circumspect about the spending. But I am not turning tail on that group. Call me a buyer there. All I can tell you is that at the end of the day, we're a service economy. If service is doing well, you can't be too negative. Twothirds of our economy may be doing better. Yes, we want to see housing come back. When you buy a house, the odds favor renovation, remodeling. Can you imagine if housing actually gets better? Do you know that Toll Brothers reported after the close and they gave us a pretty good set of numbers? Stronger revenues, stronger home sales, stronger margins despite the rise in interest rates. See the pattern I'm postulating. I am saying it's not all bad, that it's not that bad and that it could get better. Not everyone's margin, not everyone's going to get wiped out. And that short position, the NASDAQ, that just seems crazy given that there's plenty about this environment that is not that bad. Here's the bottom line. I know not bad isn't much of a clarion call, but you're certainly getting better prices than you'd see in the backdrop with if the backdrop's good. Hey, maybe that's the way to think about it. That's the opportunity. And the cost seems to be manageable. Even if this isn't likely to be the exact bottom, I am damning the market with faint praise, but it is praise nonetheless. Let's go to Chris in California. Chris, >> booyah Kramer, it's Chris from Lakehead, California. >> Good to have you in the show. Booyah. right back at you. All right, good deal. What's up? >> I've already got my initial investment out of this stock, so I'm playing with house money. But tell me, Jim, what should I do? Hold, sell, or buy more snowflake. >> You don't want to sell that snowflake, man. That thing is hot as a you This is a stock that is so obviously going to have an upside. Surprised that I just question whether be surprising when they report the upside. But I think you absolutely ought to hold it. Congratulations. See, this fellow Chris, he made real money. We could sit here and be fooling around with the S&B SBSB just talking about S&BSB SB. But you know what? If you do that, well, why be on TV? John in Florida. John, >> booyah, Jim. >> Booyah. John, what's going on? >> So, I'm a little frustrated. My stock has lower lows, has lower highs, no immediate catalyst. I don't know if I should buy more or rotate it out. What are we going to do with our Broadcom? >> Oh, now let's come on. No, no, let's let let's settle down there for a second. This is Hawk Tan. This is one of the greatest performers of all time. We can't be so shortterm that we end up selling some good stuff. I am I go back over this with Jeff Marks every like Jim is not moving, but it is up. It's been up long term. the chart if I went like this and we can see a chart which we can't most definitely it would show you a chart that is up and that chart is AVGO the old which is now Broadcom I feel like going after that call I feel like going right to Alaska let's go to John in Alaska John >> hi Jim how you doing >> not bad John thank you for asking how about you >> I'm doing good I'm doing good I just wanted to talk to you about a stock it's called Arista Networks the tickers a NET. Um I heard they're big in the AI sector for the cloud networking services, but I know that they trade at a pretty high valuation, but they're um financials have looked good recently. I was just wondering what your thoughts on that stock. >> Okay, this is J. Shri Yal, who is one of my idols. I had her on last week. I cannot believe how well they're doing. I saw the stock down five. I said to myself, if this thing were to go down 20, you know what I have to do? I have to call the club and go by surgically removed. Yes, because Jay Shri Shal Jri I should just tell say Jalal is just one of the best CEOs in America and if that stock goes down just go buy it. At these prices even a lukewarm bullishness seems like an opportunity I think. I'm not going to pass it up on Man Bunny tonight. Why is Cadence Design Systems falling out of favor on Wall Street? I talked to CEO to see what he says about his AI opportunity for the company and it's juicy and I love a good turnaround story and we're seeing one start to play out in one of the food stocks. Don't miss my deep dive with Craft Heights and they no longer own cheese wins which is too bad. That was a product they shouldn't have got rid of. And how about satellite surveillance provider Hawkeye 360 just report his first quarter as a public company. I'm learning more with the CEO. So stick with Kramer. >> Don't miss a second of MadMoney. Follow Jim Kramer on X. Have a question? Tweet Kramer #madmentions. Send Jim an email to madmoney@cnbc.com or give us a call at 1800743cnbc. Miss something? Head to madmoney.cnbc.com. special treat. Okay, right now, except for today, we have an incredible bull market in semiconductors and semiconductor capital equipment. But what about Cadence Design Systems? It's a software company that helps design chips and other electronics that I have liked since probably 1989. Okay, here's a stock that's down more than 10% over the past 12 months. victim of AI displacement worries. Don't worry, we're going to explain that doesn't seem to matter that cadence tools are used by customers like Nvidia to create the chips at the heart of the data center. This stock keeps getting lumped in with the software cohort and punished for it. Does didn't even matter when the company reported a very strong quarter at the end of July. If anyone actually bothered to listen to management over the past year, they know that AI is in fact a major tailwind for cadence. They helped design the chip for everyone saying this is serious technology that can't be vibe coded out of existence. Don't take it from me. Let's go straight to the source. Dr. Andrew Devkin. He's the president CEO of Cadence Design Systems. Dr. Devin, welcome back to Van Buddy. >> Great to be here, J. >> Okay, Andrew, it's always great to see you and I know that I always ask you to educate people. Um, there are many people who aren't quite sure what Cadence does, but somehow maybe because of analyst notes or what they hear, they hear software and they say whatever they think they're doing, it's not going to exist once uh Claude takes over. It couldn't be more wrong. Correct. >> Absolutely. We are we are irre irreplaceable part of the semiconductor industry and there are two two ways we we we play in the semi-industry. One is all the chips that are designed in the world today whether they're data center chips or or you know phone chips or or computing chips are designed with cadence software and that every Yeah. And that demand for those chips is only going you know growing because the chips get bigger. There are more of them used in all these applications. All the data center companies are now designing chips as you know. So 45% of our business now is system companies these new companies designing chips and 55% is the semi companies you know like Broadcom and Nvidia and Intel and all. So so the demand for our products is only increasing and will continue to increase for next 5 to 10 years. All right. And then the second part is when we apply AI to our own products to improve them. >> Yeah. >> Right now I think that people have to understand uh that if you apply AI to your own product, you do it faster, you can do it smaller. And we know we have this problem with Intel and Morris law. We'll get to that in a moment. But the fact is without AI, you can't be as great as you'd like to be. And with AI, any software company would still be way over their heads. And you even give examples in your conference call. It just you you wished it worked but it doesn't. >> AI is a good is a good analogy for AI plus cadence is like a turbocharger. >> Okay, >> you know our base tools are like you know like the V6 or V8 engine and AI by itself cannot do them because it's like physically accurate. You know these chips are at you know 200 billion transistors at 3 nanometer and they have to be first time right. So there's a lot of physics and mathematics involved in that which AI per se cannot do. So you still need our main tools but AI can be a turbocharger you know it can give more scenarios more because what the customers want is to improve the performance of the chip you know if it's 3 GHz they want 3 and a half GHz if it's 10 10 watts they want 90 W so it's optimization problem and AI can give more scenarios that we can run and improve the performance of the >> okay so when when Jensen Wong comes out and says listen we've got Ver Rubin uh and then After Ver Rubin, we've got Richard Feman. He has to do this in conjunction with you or it just won't work. >> Yes, we have worked with Jensen and Nvidia for like more than 20 years >> and I think Jensen has publicly talked about the importance of cadence to the design of his products and we work with him in all kinds of our products like palladium which is emulation platform, Inovas which is placed in route. So we are typically working with our customer hand in hand few years before these products come out. And the other good thing about Nvidia is they always like to try newer products from us. So like recently Jensen talked about using some of our AI agents with chipstack which got like 10 to 40x improvement in verification turnaround time. So Nvidia has been a great partner over the years. >> Now the most exciting thing about your company is there a man by the name of Bhutan who was instrumental in turning around cadence before he handed it over to you. And one of the things that he's doing at Intel is he is changing the way Intel does things. They have historically not been with Cadence which I think is a big mistake. Now they are. What are you bringing to Intel? And don't just say 14A please cuz our people don't know what a 14A is. Oh, that's a great question and you know historically we have worked very well with TSMC and their customers and TSMC has done phenomenally well in the last 10-15 years and we are very happy to work with Intel much more closely now now that Libu is there and Intel I think wants to improve their own products and also be a foundry to other customers and so our role always is to co-optimize our products with the foundry this is what we did for TSMC over the last 101 15 years so when Intel goes to their customers the product you know we can improve improve the performance of their foundry much more by co-optimizing it together. That's one part of it. And the other is in their own products in their own CPU and they're doing AI products. They can use our products to be much more competitive than they have been in the past. >> Well, that'll be important because we want them to win some very big contracts. We don't have them yet. Uh but I'm sure they will for working with you. Now, this is really important. You speak over and over again that physical AI is where you're going to be. physical A is really important and when people hear that um they say well what does that mean and now I hate to be so elemental but I am gonna have to ask you why you're so excited about physical AI >> oh I have been super excited about physical AI for more than 5 years and I've always talked about these three phases of AI you know the first phase being the data center phase which we are in and the next one being physical AI which has the potential of being bigger than the current one and then the third phase being scienc's AI in which AI is applied to you know life sciences and other kinds of sciences. So physical AI to me is applying AI to the physical world. And great examples of that are that are cars, you know, drones and robots. >> And the exciting part is that this is all going to be multi-trillion dollar markets. You know, car is already three to four trillion. You know, drones with all the defense and all will be a multi-t trillion dollar market. And and robots even industrial robot and then humanoid robots may be the biggest product category of all time. So that is going to drive a new kind of AI you know this kind of physical word models and new kind of chips you know because there'll be purpose-built chips for robots and cars and the amount of electronics and semiconductors in the cars is supposed to go up 10x in the next few years so it creates a lot of new customers like we worked with Tesla over the years and you know BYD and a lot of the robotic companies you know it's going to be new new business for cadence and we are building a flow optimized for physical AI just like we optimized for data center >> in one of your in in your discussion with Bank of America, you just look as Elon says this is going to happen. My last question is this. When I had had the privilege of having dinner with you uh a couple years ago, you explained to me listen between uh Jensen and Taiwan Semi is us and about how important you are. It sounds like that all that's happened since then is you're even more involved with the client and if we don't wait until the end and then give it to you, you're brought in like with Intel, you're brought in almost instantly. >> Exactly. So you know we are a B2B company, right? So we are not B2C. So a lot of people may not know what we do but in terms of B2B about 70 80% of our business is coming from 70 80 customers and these are all the biggest companies in the world in all the main geographies in all the main segments. So we have a saying that win with the winners. We always align with the winning companies. You know we talked about several of them today and I think this and we want to have R&D to R&D collaboration with our customers and they are going to do build amazing things and all this possible with the products we provide. >> Well I think it's great that you are here. I know sometimes it's hard to get your arms around it but if you have all this info you will you understand how indispensable this man and his company is. Andrew Devun. He's the president and CEO of Cadence Design Systems CDNs with Slip Boutan Ran before he back. >> Coming up, can Steve Cahellain turn craft hinds into a winner? Kramer's looking to history to see what could happen next. Earlier this summer, the unloved packaged food stocks finally started making a quiet move higher. Tonight, I want to circle back to one of my favorites, Craft Hinds. To be clear, there's been very little to like about this business since the old Craft Hinds merged with HJ Hines back in 2015. Since then, the stock's been a terrible underperformer. But at the beginning of this year, Craftines did something remarkable. They brought in Steve Kalane as its new CEO. And this is the guy you hire when you want to break up your business and do it right. Kane's the guy who broke up the old Kellogg and WK Kellogg for serial and Kellanova for everything else back in October of 2023. Now, both these companies ended up being acquired for a hefty premium post breakup. Originally, the prospects for both these companies look pretty grim. I remember telling Steve that and left that he needed me to tell him. And there was a lot of skepticism about whether the breakup would do anything useful. Remember, this happened right when the GOP-1 weight loss drugs were just taken off, but in relatively short order, both Kalanova and WK Kellogg were sold to larger players in the package food space for big premiums. Kellanova was always supposed to be the better one with much faster growth. And after 10 months of trading independently, we learned that Mars, the giant candy company, was acquiring them for $36 billion or 8350 per share. Stop it. The This was a $52.50 50 cent stock at the time of the buyback. The deal finally closed as December at which point Steve Ka needed a new job and that's when he came over to Craft Hinds. WK Kellogg initially had a strong run after the breakup then peaked in the spring of 2024 and turned into more of a battleground name. But in July of last year, we learned that Ferrero, that's a European food company, would be acquiring WK Kellogg for $3.1 billion, 23 $23 per share. Now, keep in mind at the time of the breakup in late 20 2023, this was a 13 and change stock and it was hated. Taken together, Kellanova and WK Kellogg were sold for combined price of roughly $39 billion. When Kaine originally announced the breakup plan of old Kellogg, it had a market cap of less than $23 billion. So, we're talking about a tremendous amount of value creation here at a time when most packaged food stocks were getting steamrolled. House of Pleasure. >> That's why I was excited when Craft Times put in Kane as the new CEO, especially since the company has already planned to break itself up. Almost a year ago, in early September of last year, uh Craft Times decided to split itself up into Global Taste Elevation Company, which would take Hines, this is a lowbudget operation, so we don't even have a full bottle. Uh Philadelphia Cream Cheese and Craft Mac and Cheese among other sauces brands, and then seasoning brands like a North American grocery company for everything else. Most people assume that Kaine was brought in just to execute that uh rather I think he'll advise breakup plan. But that's not what happened. Just a few weeks after Kaine formally started as CEO, he actually paused work on the original breakup plan, saying many of the company's problems were fixable and within our control, he told us that on our own show. Rather than immediate breakup, he wanted to return Craft Times to profitable growth first. And look, I think he made the right call. Now, I am a big fan of KA and I am a big fan of breakups because they usually unlock value. But when Craft Times announced this one, the stock dropped nearly 7% on the day of the news. In fact, Berkshire Hathway, which owns 27.5% of the company, said that wanted to dump their position because they disliked the plan so much. When Kane paused the process, Bergkshire decided to stick around. No dummies. But in this big, I still think Kane will eventually break up crafts. I just don't think he will do it in the way that the company was originally planning to do. when he went to the consumer analyst CA uh group of New York called KAGNY conference back in February, he spoke to CNBC and explained that North American grocery business wasn't doing too hot, which meant there wouldn't be much appetite for the stock in the event of a spin-off. That's why his plan is to fix the North American grocery business first. Then they can talk about breaking up the company, if that still makes sense. Now, after that news, Craft Hinds dipped down to an all-time low of $21 in March. But then the stock stabilized starting in late June and continuing through late July when the AI trade fell apart. Craft Hind had a remarkable run, climbing from $22 to $28 in just over a month. Since then, the stocks pulled back to under 25, but still represents a nice rebound. Plus, when Craft Times reported a couple weeks ago on August 5th, the company posted a healthy top and bottom line beat. The organic net sales were down 1.3% and it doesn't sound great but Wall Street was anticipating a 4.9% decline. So in fact it was much better than expected. Management even raised their fullear forecast pretty much across the board. In particular, Kaline said his brands are resonating with consumers and Craft Times's market share was improving. That that didn't usually happen for this company. Company's made a series of incremental investments in their brands mainly in the form of higher marketing spending. And that's worked too. I bet we see a ton of their companies brands this fall if you watch the NFL. As Kalan explained in that February interview on CBC, he felt that the previous regime was just too aggressive with its cost cuts and that hurt Craftine's portfolio of brands. Originally, the plan was to invest an additional 600 million this year, but when the company reported two weeks ago, Kane said, "You know what? He's going to be raising that number to 700 million because the playbook has been working so well. So, let's pull it all together here." I was very excited when Craft Hines hired Steve Kane late last year because they're doing a breakup and this guy made his shareholders a fortune when he broke up Kellogg and then both parts of the businesses quickly got acquired. But when Kane got to craft times, he realized that the pre-existing breakup plan just wouldn't work. Big chunk of the business too soft after being starred of its marketing budget for years. He decided to turn things around before he even considered a breakup. And hey, if anybody would know the right thing, it's him. The bottom line, I think Kane's just bit taking a bit more time to make sure that a breakup happens the right way. He wants Craft Hind to come into this form, this position with strength, not weakness. And now with a couple quarters under his belt, we're already starting to see evidence that the business is improving. That makes me feel even better about this stock down here. First as a turnaround play and then maybe as a breakup story again. Kane's money. Don't bet against money. Larry in my home state, New Jersey. Larry, >> hey Jim, hope your summer's going well. I saw your pictures on the uh you're fishing and tarpon off the coast of Venezuel Venezuela. Pretty amazing. >> 95 and 100 pounds, man. I brought those bad boys in, but we always throw them back. I don't want anyone to think that we don't that we eat them because tarpon can't be they're inedible. How can I help you? >> Okay. Couple calling back to make coconut water. You recommended them a little while back. I think over the winter time, >> they reported great earnings. Sales rose 28% year-over-year, but the problem was a lot of that was tariff refunds. >> So, it pulled back on their um the growth company calling about is why Coco CO still buy, sell or hold. >> I think it's a buy. I mean, look, the the multiple is high at 32 times earnings, but it's got the growth and it's got the profitability. Larry, I'm a believer. Ah, no, man. And I want to take a few more questions, but that's what happens when you're having fun. All right, we're already seeing proof that business at Craft Hinds is improving under Kolin. It makes me feel better about buying the stock. You should, too. Good turnaround coming. Watch Monday, including my post earnings exclusive with satellite company Hawkeye 360 whose stocks been hurting. Then software stocks bounced today as the rest of the AI related NASDAQ names got crushed. I'm breaking down the dichotomy and why I still believe in the sector. And of course, all your calls rapid fire tonight, the lightning round, so stay with Kramer. Earlier this summer, the unloved packaged food stocks finally started making a quiet move higher. Tonight, I want to circle back to one of my favorites, Craft Hinds. To be clear, there's been very little to like about this business since the old Craft Hind merged with HJ Hines back in 2015. Since then, the stock's been a terrible underperformer. But at the beginning of this year, Craft irons did something remarkable. They brought in Steve Kalane as its new CEO. And this is the guy you hire when you want to break up your business and do it right. Kane's the guy who broke up the old Kellogg and WK Kellogg for serial and Kellanova for everything else back in October of 2023. Now, both these companies ended up being acquired for a hefty premium post breakup. Originally, the prospects for both these companies looked pretty grim. I remember telling Steve that. And there he needed me to tell him. And there was a lot of skepticism about whether the breakup would do anything useful. Remember, this happened right when the GOP-1 weight loss drugs were just taken off. But in relatively short order, both Kalanova and WK Kellogg were sold to larger players in the packaged food space for big premiums. Kellanova was always supposed to be the better one with much faster growth. And after 10 months of trading independently, we learned that Mars, the giant candy company, was acquiring them for $36 billion or $8350 per share. Stop it. The This was a $52.50 stock at the time of the buyback. The deal finally closed this December, which point Steve Ka needed a new job, and that's when he came over to Craft Times. WK Kellogg initially had a strong run after the breakup, then peaked in the spring of 2024 and turned into more of a battleground name. But in July of last year, we learned that Ferrero, that's a European food company, would be acquiring WK Kellogg for $3.1 billion, 23 $23 per share. Now, keep in mind, at the time of the breakup in late 20 2023, this was a 13 and change stock and it was hated. Taken together, Kellanova and WK Kellogg were sold for combined price of roughly $39 billion. When Kaine originally announced the breakup plan of old Kellogg, it had a market cap of less than 23 billion. So we're talking about a tremendous amount of value creation here at a time when most packaged food stocks were getting steamrolled. >> House of pleasure. >> That's why I was excited when Craft Times put in Kane as their new CEO, especially since the company's already planned to break itself up. Almost a year ago, in early September of last year, uh, Craft Hind decided to split itself up into Global Taste Elevation Company, which would take Hines, this is a lowbudget operation, so we don't even have a full bottle, uh, Philadelphia Cream Cheese and Craft Mac and Cheese among other sauces brands, and then seasoning brands like a North American grocery company for everything else. Most people assume that Kaine was brought in just to execute that uh, rather I think you'll advise breakup plan, but that's not what happened. Just a few weeks after Kane formally started as CEO, he actually paused work on the original breakup plan, saying many of the company's problems were fixable and within our control, he told us that on our own show. Rather than immediate breakup, he wanted to return Craft Times to profitable growth first. And look, I think he made the right call. Now, I am a big fan of KA and I am a big fan of breakups because they usually unlock value. But when Craft Times announced this one, the stock dropped nearly 7% on the day of the news. In fact, Bergkshire Hathway, which owns 27.5% of the company, said they wanted to dump their position because they disliked the plan so much. When Kane paused the process, Bergkshire decided to stick around. No dummies. But in this big, I still think Kane will eventually break up crafts. I just don't think he will do it in the way that the company was originally planning to do. when he went to the consumer analyst CA uh group of New York called KAGNY conference back in February, he spoke to CBC and explained that North American grocery business wasn't doing too hot, which meant there wouldn't be much appetite for the stock in the event of a spin-off. That's why his plan is to fix the North American grocery business first. Then they can talk about breaking up the company, if that still makes sense. Now, after that news, Craft Hinds dipped down to an all-time low of $21 in March. But then the stock stabilized starting in late June and continuing through late July when the AI trade fell apart. Craft Hinds had a remarkable run, climbing from $22 to $28 in just over a month. Since then, the stocks pulled back to under 25, but still represents nice rebound. Plus, when Craft Times reported a couple weeks ago on August 5th, the company posted a healthy top and bottom line beat. The organic net sales were down 1.3% and it doesn't sound great but Wall Street was anticipating a 4.9% decline. So in fact it was much better than expected. Management even raised their fullear forecast pretty much across the board. In particular, Kaline said his brands are resonating with consumers and Craft Times' market share was improving. That that didn't usually happen for this company. Company's made a series of incremental investments in their brands mainly in the form of higher marketing spending. And that's worked too. I bet we see a ton of their company's brands this fall if you watch the NFL. As Kane explained in that February interview on CNBC, he felt that the previous regime was just too aggressive with its cost cuts and that hurt Craftine's portfolio of brands. Originally, the plan was to invest an additional 600 million this year, but when the company reported two weeks ago, Kane said, "You know what? He's going to be raising that number to 700 million because the playbook has been working so well. So, let's pull it all together here." I was very excited when Craft Hines hired Steve Kane late last year because they're doing a breakup and this guy made his shareholders a fortune when he broke up Kellogg and then both parts of the businesses quickly got acquired. But when Kane got to craft times, he realized that the pre-existing breakup plan just wouldn't work. Big chunk of the business too soft after being starred of its marketing budget for years. He decided to turn things around before he even considered a breakup. And hey, if anybody would know the right thing, it's him. The bottom line, I think KL's just bit taking a bit more time to make sure that a breakup happens the right way. He wants Craft Hind to come into this form, this position with strength, not weakness. And now with a couple quarters under his belt, we're already starting to see evidence that the business is improving. That makes me feel even better about this stock down here. First as a turnaround play and then maybe as a breakup story again. Kane's money. Don't bet against money. Larry in my home state, New Jersey. Larry, >> hey Jim, hope your summer's going well. I saw your pictures on the uh your fishing and tarpon off the coast of Venezuel Venezuela. Pretty amazing. >> 95 and 100 pounds, man. I brought those bad boys in, but we always throw them back. I don't want anyone to think that we don't that we eat them because tarpon can't be they're inedible. How can I help you? >> Okay. Company calling back to make coconut water. you recommended them a little while back. I think over the winter time >> they reported great earnings sales rose 28% year-over-year but the problem was a lot of that was tariff refunds >> so it pulled back on their um the growth company I'm calling about is why coco still buy or hold >> I think it's a buy I mean look the the multiple is high at 32 times earnings but it's got the growth and it's got the profitability Larry I'm a believer ah no man I want to take a few more questions but that's what happens when you're having fun. All right, we're already seeing proof that business at Craft Hinds is improving under Kane. It makes me feel better about buying the stock. You should too. Good turnaround coming. Watch Monday, including my post earnings exclusive with satellite company Hawkeye 360. Stocks been hurting. Then software stocks bounced today as the rest of the AI related NASDAQ names got crushed. I'm breaking down the dichotomy and why I still believe in the sector. And of course, oily calls rapid fire tonight, the lightning round. to stay with Kramer. It is time for the right play and then the lightning round is over. Are you ready? Ski D. The light round comes by. I want to start with Trudy in Texas. Trudy. Hi, Jim. Um, I'm so old. I used to watch you at Cuddlo and Kramer. >> Well, I'm so old I used to be in Cuddlo and Kramer. >> I know. I was in kindergarten, though. No. Anyhow, um I think I found a very great uh under the radar pick and shovel um stock. And I want to know what you think. It's in electronic components and design and engineering. It has some AI and data center involvement. a PE of 8.34, EPS 31, great accumulation, and a dividend of 1.40, and the name of the stock is ANET. >> Boy, you are so smart. That thing came alive. You know how much cheaper that is in Celestica than in Jill? You're right. It's pick and shovel. It's a really good stock. I'm glad you brought it to my attention. I cannot believe how low the PE is, but then again, a lot of people feel that the move is about to end at any given moment. And that's what's wrong with ABNET, which really isn't wrong. Let's go to Billy in Florida. Billy, >> hey, how you doing, Kramer? First time a long time listener. >> Excellent. >> Florida. >> Oh my god. >> No, my my friend my friends the ESPs live there. They're Say hello to them. They're fantastic. Go ahead. >> Oh, beautiful town. Beautiful town. >> Archer Aviation. Should I pass on it or >> Yeah, let's pass on it. If we want to do a spec, there are better specs out there. Honestly, you and I can do better. There's a there's tons of things where even if you just put 10 shares of 10 shares of, I don't know, of uh of SanDisk, you would do better. Okay, let's go to Chris in New Hampshire. Chris, >> hey Jim, what do you think of United Micro Electronics UMC? >> Oh, this is a tough one. You know, it's not expensive, but I just don't, you know, it's up 135%. I just don't have a catalyst at these prices. I'm gonna say no to it right now. I'm sorry. Let's go to Dan in Pennsylvania. Dan, >> give me a big Lehigh Valley buoya for you. 20 years. >> Oh my god. I love the Lehigh Valley. The Sulen Valley. I love I love all the valleys. Delval. Okay. What's going on? >> All right. We have a great company here with a drug in development for fatty liver disease. Altimmune ALT. >> Okay. Fatty liver. I think, you know, I believe the GLPs are going to be able to address that better than anything else. But I a $2 stock, count me in. But remember, stocks can go to zero. And that, ladies and gentlemen, conclusion of the lightning round. >> The lightning round is sponsored by Charles Schwab. Coming up, should you believe in today's bounce in the software stocks? Kramer's checking in on the space to decide next. Tomorrow, kick off the trading day with Squawk on the Street >> live from Post 9 at the NYSC. >> I think they should have liked that. >> You do? >> Yes, I DO BECAUSE LOOK WHAT'S HAPPENED. Look what's happened. >> I know. But you know what's tough? >> But you have been pushing for cuts. >> Well, I >> It all starts at 9:00 a.m. Eastern. Last night while prepping for our Cadence Design Systems interview that I just did, I was struck by how such an amazing company could have such an underperforming stock, up just over 1% year to date. Despite putting up some very strong numbers, Cadence is indispensable in the modern-day semi-ductive food chain. You can't design complex chips without their software. So why is it isn't it stock doing better? As I mentioned earlier, it's because every single analyst is terrified that an AI agent spawned by anthropic or open AI is going to do to Cadence well, let's just say better than what Cadence does. They can mimic it. They can beat it. Look, I get it. We keep hearing about how the mechanics, the machines will make us obsolete while they do all the our work, right? Cadence is regarded as vulnerable because in the end it's a software company and the market has collectively decided that no software is safe from AI fuel competition. Sometimes the selling goes too far. We saw the software stocks bounce back today in a knee-jerk rally because hardware was being crushed. I think that when Software King Service Now got to $81 in April and the stock was selling at just 20 times this year's earnings estimate, all that seemed just too cheap. And it's now at 119. Same with Salesforce when it traded down 150. It's in June. Now it's at 196. I used to think that these declines factored in earnings miss. That would make sense. A richly valued software company can screw up and see its stock eviscerated. But as the year dragged on, it became more and more obvious to me that the sellers weren't betting on a miss. They were thinking that these companies were worthless. Same with cades. Yet they kept reporting great numbers and it really matters. That's what was so refreshing about the recent run in workday. The human capital software play. The stock shot up from 175 to 206 last Thursday on takeover rumors that seem to have a lot of promise. I thought it would put a floor under the group. I certainly think the prices we saw earlier this summer may mark some sort of price journey's bottom for you know we get the multiple for most software stocks. But without a hard bid, I fear we could just go back to some place where everyone assumes that all enterprise software companies are facing an existential threat from creations that could be uh spun off of anthropic and open AI. Last night I talked about the change in how to value hardware stocks that we've seen over the past couple of years. The jarring declines in the software stocks represented the other side of the coin. Software stocks have always used to have higher multiples and little competition. They're now getting getting toward lower multiple status with competition from AI agents galore. Of course, for most of these companies, that AI competition remains purely theoretical. The software companies have done their best to embrace AI, literally trying to shed anything that conceive be uh cloned by a prompt or worse, beaten by a prompt. Still though, it's kind of a you can run but you can't hide situation because we know these companies aren't AI native. Sometimes they seem to be trying too hard to shed the roots instead of doing what Cadence did tonight, simply explaining how they are indispensable. I think it will ultimately sort itself out as the software stocks simply become too cheap to ignore. That's good news for those who bought them lower this summer, but bad news for pretty much everyone else because I don't think we're ever going to go back to those whole price journeys multiples. Too much disruption, too much inflation, too much respect for a group that basically really was just looking for the next Microsoft, which in itself was a dubious path until this quarter. The market will ultimately let us know if a company's worth a lot less than we thought. For example, I have no doubt the companies that design things for a living, think Adobe, Wix, Figma, deserve to be worth less than where they were a year ago. But I also believe proprietary software companies like Cadence would be worth more. All that said, I'd rather skip the existential debate and just own the hardware that was put on sale today because those stories are much simpler and stronger and nobody's worried that they're going to be wiped out by the AI that they enable. Forget about it. They're too good. Like I said, there's always more market. I promise just for you here money. I'm Jim Kramer. See you tomorrow. 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